Why World Cup goals have a big net effect on business

It's not only football fans that will be glued to their television screens this summer: finance directors, analysts and macroeconomists will be too

According to a group of economists, Johan Neeskens (orange shirt) changed penalty shootouts forever with his spot kick in the 1974 World Cup final. Photograph: Peter Robinson/EMPICS Sports Photo Agency

Picture the scene: England are playing Brazil in the semi-final of this year's World Cup. The match has gone to a penalty shoot-out. The score is tied at 4-4 as Frank Lampard steps up to take the kick that could break a 44-year hoodoo. All over the country, football fans hide heads in hands, unable to watch – as do the marketing men from the companies selling beer, replica football shirts, flat-screen TVs and even garden gnomes dressed in the England kit.

As events in South Africa this week will show, the notion that football is just a game is as old-fashioned as lace-up balls and bandy legged wingers. It is both a big business and a subject for serious academic research. Finance directors see it is as a moneymaking opportunity. Macroeconomists will study whether the competition will be a shot in the arm for South Africa's growth prospects or the sort of financial burden that dogged Montreal for decades after the 1976 Olympics.

And while England versus Germany or Brazil versus Argentina is the sort of head-to-head contest that excites the fans, the contest between the City's top economists and the statisticians to assess which sides will do well this year is just as keen. Fresh from outperforming the bookies in predicting the outcome of the Eurovision Song Contest, the statisticians who compete on the Kaggle website are confident they can see off anything that Goldman Sachs, JP Morgan or UBS throw at them.

Since the first World Cup in 1930, only seven countries – Brazil, Italy, Germany, Uruguay, Argentina, France and England – have lifted the trophy. But recent research has shown that globalisation could help to make tournaments more open. A former World Bank economist, Branko Milanovic, looked at the impact of labour mobility on football. His conclusion was that the influx of African players into the Premiership made the English domestic game less open, since the concentration of overseas talent at the big, rich clubs made it much harder for a small club to win the title than it was in the 1960s and early 1970s, when there were strict restrictions on foreign players.

By contrast, foreign players such as Kolo Touré benefit from playing in the Premiership and the added experience helps narrow the gap between national teams. If the Ivory Coast give Brazil and Portugal a run for their money in this year's Group of Death, Milanovic will be proved right.

Another paper has shown that the massive wages paid to footballers for kicking a ball around for 90 minutes twice a week may be worth it. A 2002 study comparing US baseball with English football found that in both countries the teams paying the highest wages – be they the New York Yankees or Manchester United – tended to outperform teams that paid their players less lavishly. However, only in England was it possible to identify that higher wages led to greater success rather than vice versa.

An economic briefing from Commerzbank suggests, however, that success on the field has not fed down to the bottom line. The bank cites research that shows the 20 clubs in the English Premiership have combined debts of £3.1bn on turnover of £1.8bn, which implies an average debt-to-income ratio of 173%. In context, that's worse than the state finances of Greece.

Nor are the financial problems confined to clubs like Portsmouth, which went bankrupt during the 2009-10 season. Commerzbank note that the revenues raised by football clubs look unimpressive when set against those of "real" companies. "To take one example, Robert Wiseman Dairies is one of the smallest companies in the FTSE 250 index, but in the year to March 2010 it generated revenue of £886m (almost 3.5 times that of Manchester United) and a net profit of £35.8m, versus a reported loss of £45m for Manchester United in the year to June 2008."

But the real money in football is not generated by the clubs but by those industries which have used it as a way of marketing their products. Global TV rights for the World Cup will bring in around $2bn (£1.37bn) with a further $1bn or so from corporate sponsorship.

The current Sky contract to televise the Premiership costs £1.62bn, and it is that – rather than the gate receipts – that allows football clubs to spend lavishly in the transfer markets. It is the ratcheting up of transfers and salaries during the most severe recession since the second world war that has left some economists wondering whether football will be the last bubble to burst.

Germany, Commerzbank says, organises its teams differently, with a non-profit-making model under which members of the club own more than 50% of the shares: "This is designed to prevent private investors from owning clubs, and thereby wreaking the sort of havoc on club finances which is now a feature of the English game."

In the meantime, game theorists will be eagerly awaiting those penalty shoot-outs that have so often brought heartbreak to England. A whole branch of the profession now studies penalties data, such as whether the way Holland's Johan Neeskens took a penalty in the first minute of the 1974 final led to an increased probability of a spot-kick being scored ever since. Memo to Lampard et al: Neeskens stuck it straight down the middle.